July 17, 2017

EQT to acquire Rice Energy for $6.7B

EQT Corp. has agreed to acquire Rice Energy Inc. EQT will acquire all of the outstanding shares of Rice common stock for total consideration of approximately $6.7 billion - consisting of 0.37 shares of EQT common stock and $5.30 in cash per share of Rice common stock. EQT will also assume or refinance approximately $1.5 billion of net debt and preferred equity. The transaction is expected to close in the fourth quarter of 2017, subject to customary closing conditions. As the vast majority of the acquired acreage is contiguous with EQT's existing acreage position, EQT anticipates a 50% increase in average lateral lengths for future wells located in Greene and Washington Counties in Pennsylvania. This same land synergy also complements the infrastructure footprint of EQT Midstream Partners LP, where growth opportunities are expected through drop-downs and additional organic projects. EQT will also obtain Rice's midstream assets, including a 92% interest in Rice Midstream GP Holdings LP, which owns 100% of the general partner incentive distribution rights and 28% of the limited partner interests in Rice Midstream Partners LP, and the retained midstream assets currently held at Rice. The retained midstream assets, which EQT intends to sell to EQM in the future through drop-down transactions, are expected to generate approximately $130 million of EBITDA in 2018. Breaking down the valuation in a note after the deal's announcement, Capital One Securities Inc. said "EQT will issue $5.4 billion worth of equity, pay $1.3 billion in cash, and assume or refinance $1.5 billion of net debt and preferred equity. Total consideration sums to $8.2 billion for EQT." Capital One Securities put a value of roughly $1 billion on Rice's midstream assets in Ohio, noting an 8x multiple on $130 million in 2018 EBITDA, $700 million for the LP interest in RMP, and another $500 million for the 92% GP ownership. Further, Capital One Securities noted "Rice's 1Q17 actual production of 1,273 MMcfe/d (99% dry gas) valued at $3,000 per flowing Mcfe equates to $3.8 billion of value," adding that the "midstream, production, and debt values total to $7.5 billion, which leaves $700 million of value for Rice's 187K net acres of Marcellus in PA and 65K net acres of Utica in OH. Assuming Utica and Marcellus acres fetch a similar price, the deal implies a roughly $2,800 per acre valuation." Citigroup acted as financial advisor and Wachtell, Lipton, Rosen & Katz acted as legal advisor to EQT for the transaction. Barclays Capital Inc. acted as financial advisor and Vinson & Elkins LLP acted as legal advisor to Rice Energy.

Encana to sell Piceance natural gas assets

Encana Oil & Gas (USA) Inc., a wholly-owned subsidiary of Encana Corp., has agreed to sell its Piceance natural gas assets, located in northwestern Colorado, to Denver-based Caerus Oil and Gas LLC (Caerus). Total cash consideration to Encana under the transaction is $735 million. In addition, Encana will reduce its midstream commitments by approximately $430 million, on an undiscounted basis, and will market Caerus' production related to the assets. Encana's Piceance assets include approximately 550,000 net acres of leasehold and approximately 3,100 operated wells which produced an average 240 million cubic feet per day (MMcf/d) of natural gas and 2,178 barrels per day (bbls/d) of liquids through the first quarter of 2017. Estimated year-end 2016 proved reserves were 814 billion cubic feet equivalent. The sale is subject to satisfaction of normal closing conditions, regulatory approvals, closing and other adjustments and is expected to be completed during the third quarter with an effective date of January 1, 2017. BMO Capital Markets served as Encana's financial advisor for the transaction.

Carrizo Oil & Gas to acquire Delaware Basin properties for $648M

Carrizo Oil & Gas Inc. has agreed to acquire Delaware Basin properties from ExL Petroleum Management LLC (ExL), a portfolio company of Quantum Energy Partners, for $648 million in cash, subject to customary closing adjustments. The acquisition consists of 23,656 gross (16,488 net) acres located in the core of the Delaware Basin in Reeves and Ward counties, Texas. The contiguous acreage position that is conducive for long-lateral development with a high degree of operational control with 95% of net acreage operated and a 70% average working interest across the acreage. Currently there are four rigs running and net production of approximately 8,000 Boe/d (48% oil, 67% liquids). The acreage contains multiple stacked pay zones across the Bone Spring and Wolfcamp formations. The deal is expected to close in mid-August. Additionally, Carrizo agreed to make a contingent payment to ExL of $50 million per year if WTI averages more than $50/bbl in any calendar year during 2018-2021, up to a maximum of $125 million. Citigroup served as financial advisor to Carrizo for the acquisition, and Baker Botts LLP served as legal advisor. RBC Capital Markets acted as exclusive financial advisor to ExL. The company has priced an underwritten public offering of 15,600,000 shares of its common stock at a price to the public of $14.60 per share. Net proceeds are expected to fund a portion of the purchase price for the pending Delaware Basin asset acquisition and for general corporate purposes. Pending the closing of the acquisition, Carrizo intends to use the net proceeds from this offering to reduce borrowings under its revolving credit facility. Carrizo intends to use net proceeds from this offering not used to pay the purchase price for the Pending Acquisition, including in the event it does not consummate the Pending Acquisition, for general corporate purposes, including to fund future potential acquisitions or a portion of its 2017 and 2018 capital expenditure plans. In connection with this offering, Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC are serving as the joint book-running managers. "Valuing existing production of 8 MBoe/d (48% oil) at $35M/Boe/d," Stifel analysts said in a note following the news, the implied purchase price is "~$22M/acre, near the low end of recent transactions in the basin." Assuming the above contingency is paid in full, the analysts continued, "the implied price increases to ~$30M/acre in-line to slightly above recent transactions."

BP, Rosneft sign cooperation agreement

Rosneft and BP have signed an agreement on strategic cooperation in gas and a Memorandum of Understanding (MoU) in respect to the sale and purchase of natural gas in Europe. The two companies agreed to develop integrated cooperation in gas and aim to jointly implement gas projects in Russia and abroad focused on gas exploration and production, LNG production, supply and marketing. Rosneft and BP also reconfirmed their mutual interest in cooperation in European gas marketing. According to the MoU, Rosneft and BP's wholly-owned subsidiary BP Gas Marketing Limited will enter into a long-term sales and purchase agreement for the supply of natural gas produced by Rosneft in order to ensure delivery of additional Russian gas supplies to European markets starting from 2019.

Gardner Denver to acquire LeROI Compressors

Gardner Denver Holdings Inc., a global provider of flow control and compression equipment, has acquired LeROI Compressors for approximately $20 million funded by cash on hand. Based in Sidney, Ohio, LeROI is a North American manufacturer of gas compression equipment and solutions for vapor recovery, biogas, and other process and industrial applications. LeROI will be part of Gardner Denver's Industrials Segment.

Layne Christensen to provide high-capacity water pipeline in Delaware Basin

Layne Christensen Co., a large water well drilling company and water infrastructure solutions provider, has started a new energy infrastructure business and is constructing a new high-capacity water pipeline and infrastructure system to serve energy producers in the Delaware Basin. The water infrastructure system, which is currently in the final stages of construction, is anchored by nearly 1,000 acres of company-owned, highly-productive water-producing land near Pecos, TX, and will include wells, pump stations, and in-ground storage facilities. The system encompasses more than 20 miles of high-capacity water pipeline extending northward towards Orla, TX. The system has initial production and delivery capacity of 100,000 barrels per day of non-potable water, with capacity to support further expansion from both additional water sources and delivery points. The capital investment for the system is approximately $18 million. Water sales are expected to commence during Layne's fiscal third quarter. Layne's returns are back-stopped through an initial four-year contract containing minimum volume purchases from a large publicly-traded independent oil and gas producer that is actively drilling in the area. While the initial contract is expected to ensure adequate financial returns for Layne, the company anticipates being able to deliver additional water volumes to other producers in the area and expand its capacity over time.

Carnelian Energy Capital closes fund at $600M hard cap

Carnelian Energy Capital Management LP has closed its oversubscribed second fund, Carnelian Energy Capital II LP, at the fund's hard cap of $600 million. Carnelian, a Houston-based energy investment firm founded by Tomas Ackerman and Daniel Goodman, focuses on equity line-of-credit investments in the North American upstream, midstream, and oilfield services sectors. The firm's inaugural $400 million fund closed in 2015 and includes partnerships with Bison Oil & Gas Partners LLC, Bison Oil & Gas Partners II LLC, Grit Oil & Gas Partners LLC, OneEnergy Partners LLC, Percussion Petroleum LLC, and Shot Hollow Partners LLC, among others. Kirkland & Ellis LLP served as fund formation counsel. Carnelian did not engage a placement agent for the formation of the fund.

Linn, Citizen form Roan Resources

Linn Energy Inc. has signed an agreement with Citizen Energy II LLC in which Linn and Citizen will each contribute certain upstream assets in Oklahoma to a newly formed company, Roan Resources LLC, focused on the accelerated development of the Merge/SCOOP/STACK play in the Anadarko Basin. Pro forma for the combination, Roan will have approximately 140,000 total net acres forming a core, largely contiguous position with Linn and Citizen each contributing approximately 70,000 net acres. In exchange for their respective contributions, LINN and Citizen will equally split the equity interest in Roan. The contributed properties include acreage in the following eight Oklahoma counties: Canadian, Carter, Cleveland, Garvin, Grady, Kingfisher, McClain, and Stephens. The combined entity is expected to have no outstanding debt at closing and intends to establish a new revolving credit facility secured by its own assets. Linn and Citizen are currently operating a combined total of five rigs in the Merge with plans to drill 58 gross wells combined in 2017. Combined production was more than 20,000 boe/d as of May 2017 and at current rig pace is forecast to have an exit rate of more than 40,000 boe/d by the end of 2017. The companies anticipaate an initial public offering in early 2018, subject to market conditions. Linn retains its majority operated position of approximately 105,000 net acres in the NW STACK and its Chisholm Trail midstream business, including a 250 MMcf/d capacity cryogenic plant currently under construction, and the Linn contributed acreage in the agreement remains dedicated to Chisholm Trail. Roan will have independent management and a separate board of directors comprised of four LINN designated directors, four Citizen designated directors and a to-be-appointed CEO who will be jointly designated by Linn and Citizen. Roan is actively recruiting an executive management team with a focus on accelerating development materially over the next 18 months. This transaction is expected to close by the end of the third quarter. Jefferies LLC acted as sole financial advisor, and Latham & Watkins LLP acted as legal advisor, to Linn for the transaction. Citigroup acted as sole financial advisor, and Thompson & Knight LLP acted as legal advisor to Citizen for the transaction.

Weir Oil & Gas acquires pressure control provider KOP Surface Products

Weir Oil & Gas has agreed to acquire KOP Surface Products, a provider of advanced pressure control wellhead technologies, systems, and services. KOP employs 450 people and is a provider of wellheads, surface trees, valves, actuators, and aftermarket services for the oil and gas industry. The business is headquartered in Singapore and has a manufacturing facility in Batam, Indonesia, in addition to a network of sales and service offices in Malaysia, Thailand, Vietnam, Qatar, UAE, Saudi Arabia and India. KOP's current management team will continue to lead the business, reporting into Weir's Oil & Gas division. The acquisition is for an equivalent enterprise value of US$114 million. The acquisition is expected to complete in the third quarter of 2017.

Rubicon Oilfield acquires World Oil Tools

Rubicon Oilfield International has acquired the assets and operating business of World Oil Tools Inc., a manufacturer and supplier of specialty inflatable products and technology consumed in downhole completions operations. Terms of the transaction were not disclosed. Established in 2000 and headquartered in Calgary, World has developed and delivered inflatable products for E&P operators and service companies across US unconventional basins to international land and offshore environments. The transaction adds to Rubicon's portfolio of products in the completions solutions business segment.

Arsenal Capital completes sale of Flowchem

Arsenal Capital Partners completed the previously announced sale of its portfolio company Flowchem, a manufacturer of pipeline performance products, to KMG, a global provider of specialty chemicals, for $495 million. Founded in 2001 and based in Waller, Texas, Flowchem is a global provider of drag-reducing additives (DRA), related support services and equipment to midstream crude oil and refined fuel pipeline operators. KeyBanc Capital Markets acted as exclusive financial advisor, Kirkland & Ellis LLP and Jones Day LLP acted as legal advisors and ADI Analytics LLC provided advisory services to Flowchem and Arsenal.

Bellatrix closes $34.5M asset sale

Bellatrix Exploration Ltd. has completed the previously announced sale of certain non-core assets in the Strachan area of Alberta. Concurrent with the closing of the sale, the borrowing base under the company's syndicated revolving credit facilities was reconfirmed at $120 million, unchanged from prior levels, providing the company with approximately $105 million of available liquidity post-closing (before deducting outstanding letters of credit). Other than approximately $15 million outstanding on the credit facilities, the company has no debt maturities until 2020 and 2021.

Primoris acquires Coastal Field Services

Primoris Services Corp. has acquired the assets of Coastal Field Services. Based in Beaumont, Texas, privately-held Coastal provides pipeline construction and maintenance, pipe and vessel coating and insulation, and integrity support services for leading companies in the oil and gas industry. The company targets midstream oil and gas companies that utilize pipelines and storage vessels for their products. For the year ended December 31, 2016, Coastal generated EBITDA margins greater than 10% on revenues of $37.3 million. Repeat customers accounted for approximately 90% of revenue. Total consideration was approximately $27.5 million paid in cash at closing. Coastal will operate as Primoris Coastal Field Services (PCFS), part of Primoris' Pipeline and Underground segment. Jeff Bridges, former co-owner and president, will continue to manage day-to-day operations as president of PCFS. In a note following the announcement, Wunderlich Securities analysts said the deal adds "nice Gulf Coast capabilities" in the pipeline and underground segment, noting that the price said "solid" at "less than 1x the 2016 sales figure and around 7x 2016 EBITDA, which are solid trading metrics when compared to PRIM's figures."

Lonestar Resources closes Eagle Ford deals

Lonestar Resources US Inc. has closed its previously announced Eagle Ford Shale acquisitions in Karnes, Gonzales, DeWitt, Lavaca, and Fayette Counties. The acquisition consisted of approximately 30,219 gross/21,238 net acres with Proved reserves of approximately 31.4 million barrels of oil equivalent, as estimated by Lonestar, as of December 31, 2016. After purchase price adjustments associated with net cash flows from January 1, 2017 (the effective date of a portion of the transaction), Lonestar paid approximately $110.6 million to close the transaction, consisting of $99 million in cash and approximately 2.7 million shares of its Class B Convertible Preferred Stock. This Class B Convertible Preferred Stock will be automatically converted to Lonestar's Class A Common Stock upon the consummation of the stockholder vote in respect of its previously announced Series A Convertible Preferred Stock. The cash portion of the purchase price for the acquisitions consisted of $78 million, financed by the issuance of 5,400 shares of Lonestar's Series A-1 Convertible Preferred Stock and 74,600 shares of its Series A-2 Convertible Preferred Stock to Chambers Energy Capital, with the remaining portion drawn from its recently expanded Senior Secured Credit Facility. Lonestar's Senior Secured Facility was expanded from $112 million to $160 million after closing these acquisitions. In addition, Lonestar has reached agreements to repurchase or redeem the remaining $17 million of second lien notes by June 30, 2017.